Core Viewpoint - The Bank of Japan is steadily approaching its 2% price stability target and is open to further interest rate hikes when conditions allow [1] Group 1: Economic Conditions - The formation of a virtuous cycle of wage growth is occurring, reducing the likelihood of Japan returning to a "zero-normal" state where wages and prices remain unchanged [1] - The labor market is tightening, leading to significant changes in corporate wage-setting and pricing behavior [1] Group 2: Monetary Policy - The Bank of Japan's policy stance remains consistent following the interest rate increase to 0.75% on December 19 [1] - Future adjustments to monetary policy will depend on economic and price trends aligning with the central bank's expectations [1] - A gradual normalization of policy is aimed at achieving the inflation target smoothly while supporting long-term economic growth and business confidence [1]

Core Viewpoint - The Bank of Japan is expected to maintain its gradual interest rate hike stance despite the recent electoral setback for Prime Minister Kishida, with officials believing that there is little need to change the current monetary policy path [1] Group 1: Monetary Policy - Bank of Japan officials are closely monitoring government fiscal policy but believe that if economic forecasts are met, further increases in the benchmark interest rate are appropriate [1] - The policy committee led by Governor Kazuo Ueda is likely to keep the interest rate at 0.5% in the upcoming meeting [1] - Officials are cautious about the potential inflation risks associated with significant fiscal easing, especially as food prices, such as rice, have surged, pushing inflation rates higher than expected [1] Group 2: Economic Outlook - The ongoing US-Japan trade negotiations are a factor in the decision-making process, with officials wanting to assess the impact of any agreements on inflation trends and economic outlook before proceeding with further rate hikes [1] - There is an acknowledgment among officials that inflation risks are rising, which could influence future monetary policy decisions [1]

Group 1 - The Bank of Japan (BOJ) officials believe there is currently no need to adjust the existing gradual interest rate hike policy despite uncertainties from U.S. tariff policies [1] - Officials maintain that the overall economic outlook remains unchanged while waiting for more data to assess the impact of tariffs [1][3] - The BOJ is expected to present a baseline scenario forecast during the upcoming policy meeting, but will also indicate that economic prospects remain uncertain due to tariff policies [3] Group 2 - The BOJ is considering contingency plans for extreme scenarios due to multiple risks to the economy and inflation [4] - A potential downward adjustment of inflation expectations is likely in the quarterly economic report following the policy meeting, influenced by a stronger yen, falling oil prices, and possible economic weakness [4] - The core inflation forecast for FY2027 is expected to remain around 2%, despite the recent appreciation of the yen by approximately 11% against the dollar and a 13% drop in oil prices [4] Group 3 - The BOJ's current core CPI projection for FY25 is 2.4% and for FY26 is 2% [5] - The BOJ may discuss lowering the economic growth forecast for the current fiscal year from 1.1%, with Barclays economists predicting a significant reduction to around 0.5% due to tariff impacts [5]